Taiwan’s Foxconn raises full-year outlook on strong tech demand

A poster with the Foxconn logo at the IEEE World Communications Conference in Taipei. Taiwan, December 9, 2020. (Reuters) / Ann Wang

TAIPEI (Reuters) – Taiwan’s Foxconn (2317.TW), the world’s largest maker of contract electronics, raised its full-year business outlook on Monday thanks to strong sales of smartphones and servers despite concerns about slowing demand due to rising inflation.

Like other global manufacturers, the Taiwanese company has faced severe chip shortages, which has hurt smartphone production including its main customer Apple (AAPL.O), in part due to the COVID-19 shutdown in China.

But the company said in a statement late Monday that June sales jumped 31% from a year earlier to a record high for the month, thanks to proper supply chain management and increased consumer electronics sales. Smartphones make up the bulk of its revenue.

Foxconn’s better-than-expected June sales come at a time when investors are concerned about slowing technology demand during a downturn in key markets due to rising inflation and the war in Ukraine.

Chip stocks worldwide fell on Friday after memory chip maker Micron Technology Inc (MU.O) on Thursday forecast much worse-than-expected returns for the current quarter and said the market had “weakened significantly in a very short period of time.” Read More

Foxconn said it was bullish about its business in the third quarter, adding that it could see “significant growth” from a year earlier.

For 2022, Foxconn said the outlook has improved over previous forecasts of no growth, without providing details. Read more

The company, officially called Hon Hai Precision Industry Co Ltd, said it has seen double-digit annual growth in sales of servers and telecommunications products so far this year.

The company said COVID-19 controls in China had only a limited impact on its production as it kept workers on site in a “closed loop” system.

Analysts at Daiwa Capital Markets in Taipei said in a report that the demand for servers from US cloud service providers helped drive double-digit growth for the sector. They expect Foxconn’s operating profit to grow 12-19% this year.

Morgan Stanley analysts said Foxconn’s optimistic guidance for the third quarter showed strong demand for cloud servers and iPhone aggregation will continue.

The company’s shares rose about 3% in morning trading on Tuesday, outperforming the performance of the broader market (.TWII), which rose about 1%. They’re down nearly 1% so far this year, giving the company a market value of $46.52 billion.

(Covering by Yimo Lee and Ben Blanchard; Editing by Louise Heavens and Sonali Desai)

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